Citigroup said oil prices may hit $90 (€78) a barrel at times this winter as gas-to-oil switching drives stockpiles lower.
The bank, which raised its Brent oil forecast for the fourth quarter to $85, said inventories may dwindle to their lowest level on record in terms of days-of-cover by year-end.
That comes as consumption gets a boost of as much as one million barrels a day from consumers switching away from natural gas to oil-based products amid surging energy prices.
Brent oil is already trading close to $85 a barrel, while West Texas Intermediate hit its highest since 2014 as traders gear up for higher levels of consumption amid a global energy crisis. At the same time the Organization of Petroleum Exporting Countries and its allies are only slowly returning supply to the market.
While the group is sticking to its plan to add 400,000 barrels a day of supply per month for now, it may choose to start doubling its rate of hikes to 800,000 barrels a day, under pressure from key consumers like the US, China and India, according to Citigroup.
Meanwhile, aluminium jumped to the highest since 2008 as a deepening power crisis squeezes supplies of the energy-intensive metal that’s used in everything from beer cans to iPhones.
Industry insiders like to joke that aluminium is basically “solid electricity”.
Each ton of metal takes about 14 megawatt hours of power to produce, enough to run an average UK home for more than three years.
That meant aluminium was one of the first targets in China’s efforts to curb industrial energy usage.
Even beyond the current power crisis, Beijing has placed a hard cap on future capacity that promises to end years of over-expansion and raises the prospect of deep global deficits.
Energy costs surging across Asia and Europe mean there’s a risk of more supply cuts, and some investors are betting that prices have much further to run.